More than 200 local nonprofits in danger of losing tax exempt status

CORPUS CHRISTI - A recent letter alerted Veterans Band director Ram Chavez that the small, local nonprofit was in danger of losing its tax-exempt status for failing to file a tax form.

"Our treasurer got it all taken care of over the weekend," he said. "You didn't have to do this before. This is the first time this has happened."

Chavez's organization is among 218 local nonprofits and 400,000 nationwide nonprofits named in an IRS revocation status list, a database published by the National Center for Charitable Statistics. A majority of those organizations are small nonprofits, some of which aren't aware of a 2006 IRS rule change, said Thomas Pollak, program director for the National Center for Charitable Statistics.

Nonprofits on the list that didn't file paperwork by Monday could lose their tax exempt status, meaning the organization would have to pay taxes, and donations given by contributors wouldn't be tax deductible. Organizations on the list include those that failed to file tax returns for three consecutive years.

The Pension Protection Act of 2006 required nonprofits with revenues of $25,000 or less to file an IRS Form 990, which shows the group's revenues and expenses. Prior to that, those nonprofits weren't required to file.

"We used to do big fundraisers and would have to submit their paperwork," Chavez said. "We haven't had a fundraiser like that in over 10 years."

The rule change also gave the IRS power to revoke tax exemption status for nonprofits that don't comply.

"Ultimately, the revocation process will benefit the nonprofit sector by weeding out defunct organizations and nonprofits that are not meeting their reporting responsibilities," said Bob Ottenhoff, president and CEO of nonprofit information clearinghouse GuideStar, in a news release. "In the short run, however, it will cause hardship for some organizations."

"The IRS will be providing additional guidance in the near future on how it will help these organizations maintain their important tax-exempt status -- even if they missed the May 17 deadline," he said in a news release published at IRS.gov.

Nonprofits that lose their tax exemption status would have to reapply to the IRS, a process that can take several months.

Of the 218 organizations listed in Nueces County, some may have been listed in error. The Botanical and Nature Institute of South Texas filed a 2008 return and had requested an extension for 2009, Executive Director Michael Womack said.

"This is the first time we've heard anything about it," he said Monday.

The City of Corpus Christi Housing Authority also is on the list as a public charity. CEO Richard Franco said the housing authority has never filed a tax return because it falls under a governmental authority exemption.

Repeated attempts to clarify the housing authority's status with an IRS spokeswoman for the Southern Texas region were not successful.

Texas A&M University-Corpus Christi Research Park Foundation also was among local organizations listed. Guidestar spokeswoman Suzanne Coffman said the foundation falls under a group filing, which means it files with a parent tax-exempt organization.

Is your organization on the list?

A searchable database of nonprofits in danger of losing their tax-exempt status is available from the National Center for Charitable Statistics.